Friday, May 9, 2014

Why condo units are shrinking

I know of people who are holding on to their HDB flats and buying small private condo units either to rent out, or to live in while renting out their HDB units, hence turning the subsidised flats into "long-term cash cows".

As they are not selling their flats, they cannot pay a large quantum for the condo units, which leads to growing demand for "downsized" apartments.

[Defined "large quantum".]

Letting HDB flat owners rent out their units for profit, when they can afford private property, goes against the HDB's mission of providing affordable homes for the masses.

[How so?]

A subsidised flat that is being used to generate long-term profits is not really a home.

The HDB should relook its policies in this regard.

A flat owner who buys private property should be subjected to an income assessment.

If his income is above a certain cap set by the HDB, he should be made to sell his flat on the open market within a certain period of taking possession of the private property.

When owners have to dispose of their HDB flats upon upgrading to private property, they will have more cash and Central Provident Fund savings to purchase larger condo units, which in turn encourages developers to build them.

[No. What will happen is that HDB owners will pull out of the private property market because given option of selling their HDB in order to buy a pte property, and just staying put in their HDB, guess what? Many of them will stay put. The private property market will crash. Or at least depressed. Prices will fall, and developers will build fewer condo units, big or small.]
Another way would be to limit the timeframe that an HDB flat can be rented out, if the owner has a private property under his name and does not have a valid reason, such as being stationed overseas, for renting out the unit.

[So what have you got against the rental market and people seeking to rent accommodations? Your proposal would cut the supply of rental flats in the market.]

Current rules forbid a private property owner from purchasing even a resale HDB flat. The same rule should apply to HDB flat owners looking to buy private property.

[That's not exactly correct.]

This is a loophole many are exploiting, resulting in fewer resale HDB flats on the market. This deprives people who genuinely need public housing from owning such units, and encourages developers to build smaller condo units for HDB flat owners who want the best of both worlds.

Chan Suan Yen (Ms)[A classic! Short-sighted. Single-minded, selfish perspective. Self-serving problem analysis. You could almost hear the "me! me! me!" in her letter.The simple problem is that some people who buy pte property are better off, but not necessarily so "well-off" that they see themselves as "upgrading" to pte property. At least not on a permanent basis.

HDB flats purchase is means-tested. Your family/household income needs to
be below $12k/$10k in order to buy direct from HDB at concessionary
rates.

If you and your spouse exceed the income ceiling, you have to buy from resale (no concession/ subsidy).

If you owned pte property within the last 30 months, you can't buy from HDB. You can buy resale, but you cannot use CPF, and you need to sell your property within 6 months of getting the HDB flat.

BUT, if you applied for HDB flat when your income is below the ceiling,
you can proceed with the purchase even if your income has EXCEEDED the
ceiling by the time the sale is completed.

If you move into
your flat, you can continue to STAY in your subsidised flat even if you
later get promoted and your income exceeds the ceiling.

A lot
of applicants wait for one spouse to resign from her (usually her, for
extended maternity) job so that their income falls below the ceiling, to
apply for HDB flats. Then after that, the spouse rejoins the workforce (when baby is older) and they bust the income ceiling.

Do these HDB owners return their subsidised flats when their income exceeds the ceiling? Do they top up the
subsidised price they paid? Are they still considered "low income"
families?

If the point is that HDB owners who can now afford
to buy condos should be considered above the income level, then you have to
consistently apply the rules to all those who are now above the income
level, including all the examples above.

If you find yourself
starting to make excuses as to why those people (like yourself) should
get to keep their flats, then be aware that everyone else will also have
reasons why the rules should not apply to them.

Consistency? This is consistent: you need to be below the income ceiling when you apply for HDB flats, but you are means-tested just once, and then even if you subsequently exceed the income ceiling, that's ok.

You need to not have owned private property in the last 30 months when you apply for a HDB flat, but if later you can buy one, that's ok.